The Hawaiian gazette., 1887-11-15
THE LONDON LOAN.
Col. G.. w. Macfarlane'S State
ment.
Honolulu, November.


the honor to submit to your Excellency oul
report.
At the commencement OF our operations
we found our efforts to effect a satisfactory
result, impeded and almost thwarted by the
inimical attitude of various influential jour
nails, mainly of San Francisco. Their dis
torted statements sedulously distributed II
London contributed in a great degree tC
create in the minds of English capitalists
doubts of the soundness of the Loan as
business proposition. This was counter
acted mainly, we may say, by the friendly
services of the issuing house (Messrs. Math-
eson 81 Co.. and the syndicate who guaran-
teed the Loan.
As preliminary p bond was executed
under resolution of His Majesty's Cabinet
by The Minister of Finance at that time, the
Hon. Paul j. Kanoa, which was to have been
deposited with Bank of England.
This was no extraordinary proceeding, but
one which has been usually adopted by the
syndicate, who charge themselves with effect
ing foreign loans in London. 1t appears
that this action was subjected to miscon-
strUction. parties inimical to the Loan con-
STRUNG the execution and depositipg of that
bond, as virtually giving mortgage on the
Islands to Great Britain. The preliminary
bond was only a guarantee of the Hawaiian
Government that the coupon bonds would be
issued and redeemed according to law. Upon
Washington, who conferred with me in New
York by special appointment, this bond was
withheld from such deposit with the consent
of parties interested in England, and thereby
all false inference obviated.
The law provided for the issuing of the
coupon bonds, payable IN American gold dol
lars. This provision we found serious
obstacle to our negotiations, as all foreign
loans placed in London without exception
are made payable in equivalents of British
money--for example, if a Russian Loan be
authorized for a certain amount of roubles,
the bonds are made payable, not in roubles,
but IN pounds sterling; likewise the Loans
of Rispano American countries are not repre-
sented by bonds payable in pesos or soles,
nor the Japanese Loan in yen or ityebus
This objection of English capitalists to
accept any bonds unless they and the cou-
pons are payable in pounds sterling, Is not
captious but grounded upon the fact that the
bondholder in London would encounter both
inconvenience and difficulty in using his
bonds and coupons in his commercial trans
actions if it became necessary or profitable
to discount or otherwise dispose of the same.
We did not hesitate to accede to this
change, because,
Eirstly-It was necessary to success in
floating the Loan.
Secondly-It worked no disadvantage to
the Hawaiian people.
The second proposition we beg your leave
to make clear at further length.
While your Excellency is fully conversant
with the subject, so many comments have
been publicly made upon this matter which
were unjust that we deem it our duty to lay
fully before you the reasons which actuated
Us in our course.
The impression that the bonds were to be
issued for pounds sterling and repaid in
American gold coin in the ratio of five dollars
for each pound is absurd and needs no fur
Their allusion.
The proposed form of the bond did not en-
body such proposition, but in consequence
of your suggestion that the recitals in the
bonds did not state unequivocally enough
that five dollars American gold are not re-
quied to redeem pound sterling, the word
ing IN the recitals has been changed and we
believe Will now meet your approval and that
of your colleagues in His Majesty's Cabinet.
Therefore the debt which the Hawaiian
Government assumes to pay amounts in
equivalent gold coin of the United States to
neither more nor less than the amount which
it receives in such equivalent. Upon this
amount (e2OO,0O0) interest is payable at six
per centum, amounting to $4,000 every half
year. This makes the actual remittance for
interest, at the average rate of sterling eX-
change through San Francisco on London
tsay 40 pence to the dollar about 500 400:
though the actual rate at this time would
that exchange to London is invariably in
favor of the remittor.
TheSefore the half yearly interest would
not be $4,000, as would appear from the in
termediate report of the Department of FL
nance. According then to the rate of ex-
change at the time of payment of interest
the Hawaiian Government might become a |
gamer, but under no circumstances which |
can be foreseen could it ever become loser |
by such remittances.
We will now by your leave submit to YOU |
the facts attending the placing of the Loan. |
This work was confided to the syndicate, |
the issuing house and the issuing firm of |
brokers. The syndicate were the guaran- |
tors to the Hawaiian Government that the |
Loan would be effected; in other words if |
the moneyed public in London should for |
any reason decline Or fail to subscribe to the |
Loan, the syndicate were bound to furnish |
the money at the minimum rate stated in |
the law, and for this the syndicate we're to
receive the commission of five per centum
on the first million of dollars, and such per-
centage as might be agreed upon on any fur
Their issue placed by them; that is to say, the
syndicate we're to be paid premium of five
per cent. for acting as underwriters to in
sure the success of the Loan, the difference
between the syndicate and the purchasers of
bonds being that the former are or were al
lowed a commission of five per cent. the lat
ter discount of two per cent.
There were also, outside of this commits
sion, certain expenses to be provided for.
which were necessarily incidental to placing
a first Loan upon the financial market of
London. These expenses were specifically
detailed to the late Ministry of the Hawaiian
Kingdom in letter of which subscribe the
following copy:
[Copy.l
HONOLULU, 25th August, 1856.
Has Er. W. ". GibSon-SIR: In reference
to our conversation of this morning, have
% inform you that the expenses in floating
Government Loan in London
would be as follows:
Underwriting by syndicate to
insure the success of the
Loan .:.;........ IS 90 2 Cent
English stamps duty. 10
Printing, advertising, etc.. 10 &"
Brokerage to stock brokers 5 :"
Commission TO the issuing
urm.. III
Commission to the issuing
brokers .................... 2 90 "a
Total. 15 . Cent
1t is possible that, should Hawaiian credit
n London be good, these expenses might be